Galaxy Next Generation

Greetings and welcome to the Galaxy Next Generation's first quarter 2023 earnings results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you host, Megan McGehee, CFO. Thank you. You may begin.

Thank you, and good afternoon, everyone. Welcome to Galaxy Next Generation's first quarter fiscal year 2023 conference call. The earnings release that accompanies today's call was distributed to the Newswire earlier this morning. In our remarks today, we will include statements that are considered forward-looking within the means of security flaws. including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market and potential growth opportunities. In addition, management will make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties that may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-K and other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements. So with that, I can now start our call today. And again, thank you everyone for joining this morning to discuss our financial and operational results for our first quarter ended September 30th, 2022. We're making progress towards achieving leadership in the rapidly growing market for interactive classroom technologies. Galaxy's suite of solutions is centered around our primary mission, which is to increase student engagement and achievement within a secure environment by leveraging our intuitive systems and user-friendly technology for teachers. As schools are perpetually seeking to optimize their learning environments, flexibility and safety have become paramount to the modern classroom. Schools and government organizations have recently increased budget allocations for innovative solutions to enable these aspects, which provides a significant growth opportunity for our business. In particular, the school safety and security market is a substantial opportunity, and we are receiving a significant amount of interest in our G2 Secure solution from both existing and new customers. The recent security stimulus, which allocated $1 billion in additional funding to schools for student health and safety, reflects the widespread support of addressing these issues, and the vast majority of this funding has yet to be deployed. Our GT secure system, which strengthens communication between faculty, administration, and external parties, such as first responders, is a much needed improvement over legacy solutions. In the first quarter, we continue to expand our network of reseller partnerships with a focus on highly accredited organizations that have national footprints. We are pleased to have signed on three marquee partnerships since our last earnings conference call, namely A3 Communications, CAMCOR, and most recently, Bloom, formerly known as Troxel. A3 is one of the country's fastest growing systems integrators that has a massive national coverage model. CAMCOR, which has a 70-year operating history, has a strong foothold on many educational technology and security contracts at the national, state, and local levels. And then finally, Bloom, North America's leading education technology solutions provider, has over 150 sales representatives that reach over 26 million students with the technologies and services that they provide. We are excited to work with each of these teams as part of our accelerated go-to-market strategy, and we look forward to growing our business together. Our reseller partnerships now consist of nearly 50 nationally renowned and regional specialists, which we believe will allow Galaxy to effectively capture market share among their local school systems. Galaxy's growing recognition in the education industry is reflected by our ability to secure these partnerships. We are also proud to receive top awards from leading publications and media brands in the education industry, including Spaces for Learning and The Journal. Our sales mix has continued to skew towards higher margin products, such as the G2 Communicator, our digital intercom platform that offers both flexibility and scalability through the integration process. This shift, along with the more robust internal sales function and reseller network, positions us well for sustainable long-term growth. Also in reference to that, I'd like to remind everyone of our robust IP moat that we've built to protect the underlying value of these technologies, which we believe is a critical component of our growth strategy. We now have two patents issued and two patents pending in relation to G2 Communicator and G2 Link. It is a critical time for schools to invest in solutions that enable a more effective, safe, and overall positive learning environment. As the billions of dollars across federal and private funding are deployed over the coming years, our team is very well prepared to demonstrate the value of our systems across our product suite. I will provide an overview of financial and operational results for the three months ended September 30th, 2022 momentarily. However, I'd like to first provide some context. The fourth quarter of fiscal 2022 was a transitional period for our company. as we moved away from only selling our classroom audio solution through OEM partners and shifted back under the GT brand. This resulted in our operating, I'm sorry, this resulted in reporting of very minimal revenues for the fourth quarter. However, our first quarter results reflect our ability to quickly recover our revenue base. Although we did experience a decline in revenue in the first quarter compared to the same quarter last year, we saw a tremendous increase from Q4 into Q1. I'd like to also note that in comparison to last year's first quarter and including deferred revenue, we're only about $400,000 off the mark from revenues reported in the comparative 2022 quarter. Operationally, we are already seeing the benefits of this transition become apparent, and we expect it to incrementally benefit our operating results over the remainder of the fiscal year and beyond. Revenues were approximately $620,000. compared to 1.7 million in the prior year quarter. Deferred revenue made up approximately 660,000 at the end of the quarter. The decrease in revenues during the quarter was due to delays in the supply chain issues, which resulted in a large increase in the deferred revenue at quarter end. Gross profit was approximately 354,000, which compared to gross profit of 666,000 in the prior year. The resulting gross margin was 57% for the first fiscal quarter, an increase from 40% in the prior year quarter, reflecting a shift in our sales mix toward those higher profit margin products. General and administrative expenses were $1.6 million in the first fiscal quarter compared to $1.5 million in the prior year quarter. Net loss was $1.5 million for the first quarter, which compared to a net loss of approximately $386,000 in the prior year quarter. Company often uses non-GAAP adjusted EBITDA numbers to measure the strength of the underlying operations of our business. For the first fiscal quarter, we showed a non-GAAP adjusted EBITDA loss of a million compared to a positive adjusted EBITDA of approximately 40,000 in the prior year quarter. Turning to our balance sheet, we ended the quarter with a shareholder's deficit of approximately 3.4 million. We reported total assets of 4.6 million, which was flat compared to 4.6 million at the end of fiscal year 2022. Cash and cash equivalents total approximately $270,000 as of fiscal year end compared to approximately $300,000 as of the end of the fiscal year 2022. We reported total liabilities of $8 million, which compared to $6.8 million at fiscal year end. And finally, on the topic of guidance, we expect our annual revenue to be at least $6 million, which represents the year-over-year growth of at least 50% from fiscal 2022. This expected increase in revenue reflects our expanded sales team and reseller partnership network. We continue to focus on strengthening our balance sheet in preparation for both short-term operational goals and ultimately our long-term growth. And with that, I will open the call up to the question and answer session.

Thank you.

We will now be conducting our question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

To ask a question, please press star one now. Reminder to participants, if you wish to ask a question, please press star followed by one on your touch-tone phone now. Participants who wish to ask a question, press star one.

Okay, I believe if we have no follow up questions, we can move to the conclusion of today's call. And I thank you all for joining us on our call today. As we look ahead, we continue to focus on building out our brand and our channel partners to drive consistent growth quarter over quarter. We look forward to the remainder of fiscal year 2023 as we increasingly demonstrate the value proposition of our solutions to the education technology market and look forward to sharing

our Q2 results with you. Thank you. Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time.

Thank you for your participation.